to offer any inducements or mitigation. No carrots at all. Only the stick. Or, as the CEO of one electric utility described it, “the bayonet.”
And so they built a considerable coalition. The Clean Air Act Amendments of 1990 and the resulting SO2 reductions constituted the model for what they were trying to do on cap and trade. That was the narrative for what they said would happen with cap and trade—faster achievement, lower costs, bigger impact. But Markey had another narrative in mind as well: the way in which the digital revolution was transforming the American economy. He had championed legislation that had helped to make the digital revolution possible by promoting competition in the cable and phone industries. “We took down all the barriers,” he said. “Everybody could do everything. We created a broadband digital revolution.” When Bill Clinton signed the Telecommunications Act in 1996, not a single home in America had broadband. And now it’s all been transformed. “The job of government is to create conditions for paranoia-inducing Darwinian market competition, and you will have capitalism that is flourishing, and then government can get out of the way,” Markey continued. “If we incentivize, we will unleash innovation.”2
And if the broadband revolution had created what he estimates to be almost a trillion dollars of new value, then, by his calculation, a similar ruthless Darwinian climate-change-stimulated competition in the much larger energy sector should stimulate whole new industries and create several trillion dollars of new value.
As the bill made its way through committee and markup, it grew from six hundred pages to over fourteen hundred pages. Its goal was to reduce carbon dioxide emissions by an extraordinary 83 percent by 2050 from 2005 levels, which meant that, going forward, energy investment in the United States would have one central focus—carbon reduction. Unless some form of carbon sequestration could be economically developed on a large scale, oil, natural gas, and coal would mostly disappear. And all the things that depend on these fuels would change. This was not the energy system that Americans—and the American economy—now knew. The carrot was very large: As a result of all the horse trading and pragmatism, over $2.3 trillion of allowances would be awarded to various sectors in the economy. Moreover, the bill would largely withdraw the authority of the EPA to regulate carbon dioxide under the Clean Air Act Amendments of 1990. The bayonet would be withdrawn.
Some argued that it could not happen that fast, that the energy sector is more complex, more capital-intensive, more long-term, and thus much slower to change than telecommunications. They doubted that the technologies would be there in scale—and in time. Carbon capture and sequestration had a long way to go before it was proved. Many wondered about the complexity and scale of cap and trade, and thought a tax was so much simpler and more direct. Others said that, in any event, cap and trade was simply a tax disguised in a complex garb, and they took to calling it “cap and tax.” They argued that vast disruptions would ensue. And that the costs were being woefully underestimated. The Midwest, with its coal-fired electricity, would be hit hard. So would agriculture.
Here the Congress was going to create a vast new market in carbon—bigger than any other market—in the very year that the Great Recession had bred such deep distrust of markets. Carbon would become an “asset,” a “currency.” Cap and trade, critics warned, would not be a boon to the environment but to Wall Street and all the others who would figure out how to trade—and game—the carbon markets, at a time when the repute of financial markets and financial institutions had fallen markedly.
On the evening of June 26, 2009, the bill passed, 219–212. Forty-four Democrats voted no, eight Republicans voted yes. Still, there would be no new legislation without the U.S. Senate. Nothing would happen unless a bill got through the Senate.
CHINA: “WIN-WIN”
In 2007, by some measures, China’s carbon dioxide emissions exceeded those of the United States. By 2030 its CO2 output, if unchecked, could, some said, exceed that of the member countries of the entire Organisation for Economic Co-operation and Development (OECD) combined. China was also facing increasing international criticism over this increase.
Beijing replied to this in three ways. First, it noted that its energy use and CO2 emissions—when measured on a per capita basis—are only a small fraction of that of the United States and Europe. Second, it emphasized that China is still a relatively